Arnold Van Den Berg (Trades, Portfolio)’s Century Management disclosed it established four new positions when it released its first-quarter portfolio earlier this week.
With the goal of long-term growth of capital, the value investor’s firm buys the stocks of companies that are trading below what they believe it is worth. The four new positions are Alliance Data Systems Corp. (ADS, Financial), Post Holdings Inc. (POST, Financial), TriMas Corp. (TRS, Financial) and Reading International Inc. (RDI, Financial).
Alliance Data
Having previously closed a position in Alliance Data Systems in the fourth quarter of 2016, Century Managment established a new 93,988-share holding for an average price of $244.84 per share. The transaction expanded the portfolio 2.97%.
The Plano, Texas-based credit services company has a market cap of $12.32 billion; its shares were trading around $222.51 on Thursday with a price-earnings ratio of 15.34, a price-book ratio of 6.16 and a price-sales ratio of 1.60.
The Peter Lynch chart below shows the stock is trading near its fair value.
Alliance Data’s financial strength was rated 4 out of 10 by GuruFocus. Since the company has issued roughly $4.5 billion in new long-term debt over the past several years, its interest coverage has been weakened. In addition, the Altman Z-Score of 1.43 indicates the company is financially distressed and is at risk of bankruptcy. The company’s profitability and growth scored a 9 out of 10 rating. While the company’s operating margin has been declining for the past five years, it is supported by a strong Piotroski F-Score of 9 and a perfect business predictability rating of five out of five stars.
With 10.64% of outstanding shares, Jeff Ubben (Trades, Portfolio) is Alliance’s largest guru shareholder. During the quarter, Joel Greenblatt (Trades, Portfolio), Jim Simons (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) also established positions in the stock. Other guru shareholders include Andreas Halvorsen (Trades, Portfolio), Glenn Greenberg (Trades, Portfolio), Jerome Dodson (Trades, Portfolio) and Ray Dalio (Trades, Portfolio)’s Bridgewater Associates.
Post Holdings
The firm invested in 153,262 shares of Post Holdings for an average price of $77.28 per share, giving the holding 1.72% portfolio space. He previously sold the stock in the third quarter of 2015.
Headquartered in Missouri, the consumer packaged goods company, which produces cereal, egg products, refrigerated potato and dairy items and various protein bars, has a market cap of $5.29 billion; its shares were trading around $78.63 on Thursday with a price-earnings ratio of 18.48, a price-book ratio of 1.71 and a price-sales ratio of 0.98.
According to the Peter Lynch chart below, the stock is overpriced since it is trading higher than its fair value.
Post’s financial strength was rated 4 out of 10 by GuruFocus. Plagued by a mounting debt load, the company’s Altman Z-Score of 0.98 warns the company is in danger of going bankrupt. The company’s profitability and growth fared better, scoring an 8 of 10 rating. While its operating margin has declined over the past several years, it still outperforms 73% of competitors. In addition, it has a moderate Piotroski F-Score of 6.
Of the gurus invested in Post, Simons has the largest holding with 2.54% of outstanding shares. Greenblatt also started a position during the quarter. Diamond Hill Capital (Trades, Portfolio), Gabelli, First Eagle Investment (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio) also hold the stock.
TriMas
The investment firm picked up 264,205 shares of TriMas for an average price of $25.89 per share, allocating 1.03% of the portfolio to the position.
The engineered products manufacturing company, which is based in Michigan, has a market cap of $1.37 billion; its shares were trading around $29.95 on Thursday with a price-earnings ratio of 28.35, a price-book ratio of 2.42 and a price-sales ratio of 1.65.
Based on the Peter Lynch chart below, the stock appears to be expensive as it is trading above its fair value.
GuruFocus rated TriMas’ financial strength 6 out of 10. While its interest coverage meets Benjamin Graham’s standard of 5, it still lags behind peers in its sector. Additionally, the company’s Altman Z-Score of 2.72 indicates the company is under some financial pressure. The company’s profitability and growth scored a 5 of 10 rating. While the operating margin is declining, it still outperforms 71% of competitors. In contrast, TriMas has a high Piotroski F-Score of 8 and a one-star business predictability rating.
Richard Pzena (Trades, Portfolio) is the company’s largest shareholder with 5.05% of outstanding shares. Chuck Royce (Trades, Portfolio), Diamond Hill, Simons, Greenblatt, Jones and Barrow, Hanley, Mewhinney & Strauss also hold the stock.
Reading International
After closing a position in Reading International in the second quarter of 2016, Century started a new holding of 253,430 shares for an average price of $16.61 per share. The position now sits in 0.63% of the portfolio.
The Los Angeles-based movie theater chain has a market cap of $389.42 million; its shares were trading around $16.20 on Thursday with a price-earnings ratio of 12.19, a price-book ratio of 2.08 and a price-sales ratio of 1.32.
The Peter Lynch chart below shows the stock is trading below its fair value, suggesting it is undervalued.
Since the company has been issuing new long-term debt over the past several years, GuruFocus rated Reading’s financial strength 5 out of 10. In addition, the Altman Z-Score of 1.92 indicates the company is under minor financial stress. Reading’s profitability and growth scored a 6 of 10 rating. While its operating margin has been in decline for the past several years, the company has a moderate Piotroski F-Score of 5 and a two-star business predictability rating.
With 4.47% of outstanding shares, Simons is the company’s largest guru shareholder. Gabelli and Donald Yacktman (Trades, Portfolio)’s Yacktman Asset Management are also shareholders.
Other trades
During the quarter, Van Den Berg’s firm also expanded its positions in Berkshire Hathaway (BRK.B, Financial), Atkore International Group Inc. (ATKR, Financial), Powell Industries Inc. (POWL, Financial) and Ardmore Shipping Corp. (ASC, Financial).
The Austin, Texas-based firm’s $674 million portfolio, which is composed of 48 stocks, is largely invested in the industrials sector. According to GuruFocus, the CM Value I Fund underperformed the S&P 500 in 2017 with a return of 2.74%. The index posted a 21.71% return.
Disclosure: No positions.
